Judge must decide state-law arbitrability of Amazon last-mile driver claims - Reuters

• Judge should've looked to state law before ordering discovery on FAA exemption
• Lawsuit claims Amazon misclassified drivers as independent contractors
• 1st, 9th Circuits have said FAA doesn't apply to Amazon drivers

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(Reuters) - A divided U.S. appeals court on Wednesday said a federal judge should have decided whether an Amazon.com Inc "last mile" delivery driver was required to arbitrate wage-and-hour claims under state law before ordering discovery on whether he was exempt from the Federal Arbitration Act.

The 3rd U.S. Circuit Court of Appeals in a 2-1 decision said discovery on whether plaintiff Robert Harper was "engaged in interstate commerce" and exempt from the FAA would be pointless if it were ultimately determined that he had to arbitrate his claims under Washington or New Jersey law.

The panel remanded the case to U.S. District Judge Freda Wolfson in New Jersey to determine how state law applies before delving more deeply into the FAA issue.

Amazon was backed by the U.S. Chamber of Commerce, which in an amicus brief last October urged the 3rd Circuit to rule that Amazon drivers who make local deliveries are not exempt from the FAA. The 1st and 9th Circuits last year disagreed and said Amazon drivers did not have to arbitrate misclassification claims because they deliver packages that crossed state lines.

Seattle-based Amazon and its lawyers at Gibson, Dunn & Crutcher did not immediately respond to requests for comment. Nor did Deborah Mains of Costello & Mains, who represents Harper.

Harper in his 2019 proposed class action claimed Amazon misclassified drivers as independent contractors rather than employees and owed them minimum wage and overtime pay and tips.

Wolfson last year denied Amazon's motion to compel arbitration, finding that discovery was necessary to determine whether Harper was involved in interstate commerce and thus exempt from the FAA. Amazon had argued that Harper was also required to arbitrate his claims under either Washington or New Jersey law.

Amazon appealed, and the 3rd Circuit majority on Wednesday sided with the company.

In cases where the application of the FAA exemption is unclear, limited discovery may be ordered, the court said. But when state law grounds exist that would compel arbitration even if the FAA does not apply, courts must decide that threshold question before ordering discovery, Circuit Judge Paul Matey wrote.

"The parties' primary agreement is to arbitrate their disputes, so courts should explore both contractual routes to effectuate that agreement when one is called into question," Matey said, joined by Circuit Judge David Porter.

Matey also wrote a separate concurring opinion urging Congress to consider "a different approach to arbitration" than the one it adopted 96 years ago in passing the FAA, in light of the emergence of the "gig economy."

"Indeed, one might ask whether even the most local of main-street shops that elects to sell its goods, advertise its services, or collect its payments electronically is instantly transformed into 'foreign or interstate commerce,'" he wrote.

In dissent, Circuit Judge Patty Shwartz said that because the arbitration agreement between Amazon and its drivers provided for resolution of disputes under the FAA, Wolfson was right to find that she first had to determine whether that law applied.

The case is Harper v. Amazon.com Services Inc, 3rd U.S. Circuit Court of Appeals, No. 20-2614.

For Harper: Deborah Mains of Costello & Mains

For Amazon: Jason Schwartz of Gibson, Dunn & Crutcher

(CORRECTION: A previous version of this article incorrectly stated that Circuit Judge David Porter wrote the concurring opinion. Circuit Judge Paul Matey wrote both the majority and concurring opinions.)

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source: https://www.reuters.com/legal/transactional/judge-must-decide-state-law-arbitrability-amazon-last-mile-driver-claims-2021-09-08/

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